Core views:
Event: Huali Technology released its 2023 performance forecast. In 2023, the company's net profit is expected to be 50 to 60 million yuan, and after deducting non-net profit, it is estimated to be 50 to 60 million yuan, all turning a loss into a profit over the previous year. Looking at the semi-annual period, 23H2, the company's net profit is expected to be 3252-42.52 million yuan, up 86% to 143% month-on-month; net profit after deducting non-net profit is expected to be 33.04 million yuan to 43.4 million yuan, an increase of 95% to 154% over the previous year, turning losses into profits. Looking at a single quarter, in 23Q4, the company's net profit is expected to be 531 to 15.31 million yuan, a decrease of 44% to 80% from the previous month; after deducting non-net profit, it is estimated to be 515 to 15.15 million yuan, a decrease of 46% to 82% from the previous year, turning losses into profits. The month-on-month decline was mainly due to increased investment in the early launch of new products in Q4 and the impact of the high base during the Q3 summer season.
Along with the recovery in consumption, downstream playground customers increased their willingness to add new stores, and sales of game and amusement equipment increased; with the number of card machines sold, the steady expansion of coverage areas, and a recovery in floor efficiency, sales revenue for anime IP derivative products increased.
In terms of Q4 operations, new and old products in the card machine business have been iterating, core products such as Minecraft and Pokémon have steadily contributed revenue, and the launch of new products has gradually increased. According to the company's official account, on 9/26, the “Naruto” IP card machine was officially launched; in December, Huali Technology's first self-developed Guochao IP “Three Kingdoms Fantasy” card machine was officially launched. As the winter vacation and Spring Festival holidays approach, the card machine business is expected to grow further.
Profit forecasting and investment advice. Considering the pace of consumption recovery, we slightly adjusted our profit forecast. The company's revenue for 23/24 is estimated to be 801/943 million yuan, respectively, and net profit to mother of 0.56/088 million yuan.
After 23 years of uphill operation, the normal operating rhythm was resumed in 24 years. Sales of amusement equipment expanded, animation IP derivative products continued to be released, profit margins on operating services rebounded sharply, and profits are expected to be released rapidly in 24-25 years. Based on the company's leading position and channel advantages, the company was given 45X PE in 24 years, corresponding to a reasonable value of 26.90 yuan/share, and maintained a “buy” rating.
Risk warning. (1) Offline game arcade regulations are getting stricter; (2) goodwill impairment; (3) card machine installation speed falls short of expectations.